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When it comes to estate planning, women have unique concerns. The fact is that women live an average of five years longer than men.* That’s important because it means that there’s a greater chance that you’ll need your assets to last for a longer period of time and a greater need to plan for incapacity. It also means that you’ll need to take responsibility for your own estate plan.
What is an estate plan?
An estate plan is a map that allows you to dictate what happens to your personal and financial property in case of your incapacity or death.
If you’re married, the odds are, you’re going to outlive your husband. That’s significant for a lot of reasons, but most importantly, you’ll have the last word in the final disposition of all of the assets you’ve accumulated during your marriage.
Planning for incapacity
Incapacity can happen to anyone at any time, but your risk generally increases as you grow older. Failing to plan may mean the court would have to appoint a guardian, and the guardian might make decisions that would be different from what you would have wanted.
Health-care directives can help others make sound decisions about your health when you are unable to. These might include a Living will, a Durable power of attorney for health care (health-care proxy), or a do not resuscitate (DNR) order.
There are also tools that help others manage your property when you are unable to, including Joint Ownership, Durable Power of Attorney and a Living Trust.
Wills and probate
A will is quite often the cornerstone of an estate plan. It is a legal document that directs how your property is to be distributed when you die. It also allows you to name an executor to carry out your wishes and a guardian for your minor children.
Most wills have to be probated. The will is filed with the probate court, then the executor collects assets, pays debts and taxes owed and distributes any remaining property to the rightful heirs. Smaller estates can be exempt from probate or may qualify for an expedited process.
For some complex estates, probate can take up to two or more years to complete and tie up property that your family may need. Also, wills and other documents submitted for probate become part of the public record, which may be undesirable if you have privacy concerns.
Probate may be avoided by owning property jointly with rights of survivorship and by completing beneficiary designations for property such as IRAs, retirement plans and life insurance.
Trust basics
A trust is a versatile estate planning tool that can protect against incapacity, avoid probate, allow professional management of assets, and provide safeguards for minor children, elderly parents and other beneficiaries. Most importantly, trusts can provide a means to administer property on an ongoing basis according to your wishes, before or after your death.
A trust is a legal entity where someone, known as the grantor, arranges with another person, known as the trustee, to hold property for the benefit of a third party, known as the beneficiary. The grantor names the beneficiary and trustee and establishes the rules the trustee must follow in a document called a trust agreement.
You can create a trust while you are alive (a living trust) or at your death (a testamentary trust). A trust you create during your life can be either revocable or irrevocable. You retain the right to change or revoke a revocable trust. An irrevocable trust cannot be changed or revoked. A trust you create at death is irrevocable.
What happens if you die without a will or an estate plan?
Property that does not pass by beneficiary designation, joint ownership, will or trust passes according to state intestacy laws, generally allowing for portions to be distributed to related persons. This may not be in accordance with your wishes so please plan ahead.
Transfer taxes & Lifetime Giving
When you dispose of your property during your lifetime or at your death, your transfers may be subject to federal and state gift or estate taxes.
Making gifts during one’s life is a common estate planning strategy that can serve to minimize these taxes. The annual gift tax exclusion lets you give up to $15,000 to as many individuals as you want gift tax free. Making a gift can also let you see the recipient enjoying the benefit of your gift while you are still alive.
We specialize in helping women plan through all the various stages of their lifetime.
*NCHS Data Brief, No. 328, November 2018.
